Journal ArticleDOI
Full extraction of the surplus in bayesian and dominant strategy auctions
Jacques Cremer,Richard P. McLean +1 more
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In this article, the authors consider auctions for a single indivisible object, in which the bidders have information about each other which is not available to the seller and show that the seller can use this information to his own benefit, and completely characterize the environ- ments in which a well chosen auction gives him the same expected payoff as that obtainable were he able to sell the object with full information about the bidder's willingness to pay.Abstract:
We consider auctions for a single indivisible object, in the case where the bidders have information about each other which is not available to the seller. We show that the seller can use this information to his own benefit, and we completely characterize the environ- ments in which a well chosen auction gives him the same expected payoff as that obtainable were he able to sell the object with full information about each bidder's willingness to pay. We provide this characterization for auctions in which the bidders have dominant strate- gies, and for those where the relevant equilibrium concept is Bayesian Nash. In both set-ups, the existence of these auctions hinges on the possibility of constructing lotteries with the correct properties. WE CONSIDER the situation in which an agent, the seller, possesses one indivisible unit of a good to which he attaches no value. But the good has value to a number of potential buyers, and its transfer to one of them would increase social welfare. In particular, the transfer to the buyer with the highest valuation maximizes social welfare. In this paper, we completely characterize environments in which the seller can design an auction that will enable him to capture for himself the full increase in social welfare induced by the transfer of the good to the bidder with the highest willingness to pay. If the seller had full information about the reservation prices of potential buyers, his optimal selling strategy would be very simple. He would announce a price equal or very close to the highest reservation value. The optimal strategy for the bidder with the highest evaluation would be to accept the offer. (Note that we are treating a situation in which the seller can commit himself to a price.) As a result of the exchange, the utility of the seller increases by the full amount of the increase in social welfare, and he has been able to fully extract the surplus. In many circumstances, however, a seller has only imperfect knowledge of the buyers' willingnesses to pay. In this case, he must find some mechanism, or auction, which will enable him to maximize his benefit from the sale of the object. The auction literature starts with this observation and shows how the seller can, by an astute choice of auction, extract the largest possible fraction of the surplus. In general, the literature has shown that this proportion is strictly less than one. In some circumstances, the bidders will have information about each other which is not available to the seller. For instance, in auctions for petroleum drilling rights, bidders know the results of geological tests which they haveread more
Citations
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Journal ArticleDOI
On the Informed Seller Problem: Optimal Information Disclosure
TL;DR: In this paper, the authors consider a revenue-maximizing seller who, before proposing a mechanism to sell her object(s), observes a vector of signals correlated with buyers' valuations.
Journal ArticleDOI
Discrimination via Symmetric Auctions
Rahul Deb,Mallesh M. Pai +1 more
TL;DR: In this article, the authors show that restricting the seller to using an anonymous, sealed bid auction format (or simply, a symmetric auction) imposes virtually no restriction on her ability to discriminate and highlight the discrepancy between the superficial impartiality of the auction rules and the resulting fairness of the outcome can be extreme.
Journal ArticleDOI
Robust Virtual Implementation: Toward a Reinterpretation of the Wilson Doctrine
TL;DR: Two necessary conditions, Δ-incentive compatibility and Δ-measurability are obtained and it is shown that the former is satisfied as long as a particular zero-measure set of first-order beliefs is ruled out and in environments allowing small transfers of utility among agents, these two conditions are also sufficient.
Journal ArticleDOI
Relational contracts with subjective peer evaluations
TL;DR: In this paper, the authors study the optimal dynamic contracting for a firm with multiple workers where compensation is based on public performance signals and privately reported peer evaluations and show that if evaluation and effort provision are done by different workers (e.g., consider supervisor-agent hierarchy), first-best can be achieved even in a static setting.
References
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Journal ArticleDOI
Optimal Auction Design
TL;DR: Optimal auctions are derived for a wide class of auction design problems when the seller has imperfect information about how much the buyers might be willing to pay for the object.
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Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods
Journal ArticleDOI
Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist when Demands are Interdependent
Jacques Cremer,Richard P. McLean +1 more
TL;DR: In this article, the optimal design of resource allocation mechanisms in the presence of asymmetric information was studied and sufficient conditions were provided under which the seller can extract the full surplus from the buyers in an "ex post Nash" equilibrium.
Journal ArticleDOI
Groves' scheme on restricted domains
TL;DR: In this article, it was shown that Groves' scheme is unique on restricted domains which are convex, in particular convex domains, and this generalizes earlier uniqueness results by Green and Laffont and Walker.
Journal ArticleDOI
Optimal contracts with public ex post information
TL;DR: In this paper, the authors derive necessary and sufficient conditions for a public ex post signal (s ∈ S) that is correlated with the risk-neutral seller's costs to render the initial information asymmetry inconsequential to the buyer.